On Oct. 17, 1989, Arthur Reyes was in his dorm room at Stevenson College, on the picturesque hilltop campus of the University of California at Santa Cruz, when his bed started to shake violently.

“I looked across my dorm room to see books flying off the shelf, the door swung open and the light fixture fell from the ceiling,” he recalled.

It was 5:04 p.m. From its epicenter just 10 miles north of Reyes, near the Loma Prieta Peak, the 7.1 magnitude quake roared along a 22-mile stretch of the San Andreas fault through the Bay Area, collapsing a portion of the Bay Bridge and the Cypress Freeway in Oakland, and crushing homes in the Marina District in San Francisco and the Pacific Garden Mall in Santa Cruz.

When it was over, 63 people were dead, more than 11,000 homes destroyed and $6 billion in damage done.

Today Reyes is 45, a biologist with Genentech and married with three children, but he’s still struggling with the Loma Prieta quake, in a different way.

For many of Reyes’ generation, who are now entering their peak earning years and looking to purchase bigger homes to accommodate families, the aftershocks of the Loma Prieta quake, as well as the 1994 Northridge quake in Southern California, (which caused $15 billion in damages) are financial. He paid $1,200 in 2014 on top of his homeowner insurance for an earthquake rider on his Palo Alto house, and the price increases every year. The average premium in Santa Clara County is $1,447, according to the California Earthquake Authority (CEA).

“As a homeowner, it’s frustrating dealing with these insurance premiums,” he said. “We might get priced out of our home if our premiums keep increasing.”

Many California home buyers are in similar binds. The expensive deductibles related to earthquake insurance are sometimes as high as 15% of the value of the home, which has many homeowners giving the insurance a second thought.

Premiums are determined by a combination of a home’s replacement value and its proximity to a high-risk fault. And for homeowners in Northern California, where some of the most valuable real estate in the country lies in an earthquake hot zone, that makes for an expensive financial double whammy.

An expensive one-two punch

The CEA was set up in the aftermath of the 1989 and 1994 quakes to help provide low-cost insurance, after many property and casualty insurance companies pulled out following the quakes. According to the CEA, average earthquake insurance premiums statewide rose from about $540 a year in 1998 to $830 in 2005. The CEA instituted a decrease in premiums later that year, but they have been rising ever since, now averaging about $800 a year.

RMS

The areas of greatest earthquake risk in the San Francisco Bay Area. (Map by Risk Management Solutions.)

But the average figures don’t really illustrate the cost in some of the highest-risk and most populous areas. The average premium in 2014 on earthquake insurance for single-family homeowners in San Francisco County was $2,156; it was $1,800 in Alameda County (along the Hayward Fault) and nearly $1,000 in Los Angeles County, according to the CEA.

In contrast to Florida, where hurricane insurance is often mandatory, earthquake insurance is entirely optional in California. And as premiums have gone up, more homeowners have opted out. The number of earthquake insurance policies in California has dropped to just 10% of homes statewide, down from 34% in 1994, according to Risk Management Solutions, a Hayward, Calif.-based company.

Newcomers to the Bay Area who haven’t experienced a big quake and are put off by the insurance price are partly responsible for the low numbers of home buyers signing up for earthquake insurance, according to Patricia Grossi, senior director of global earthquake modeling at RMS.

“A lot of young people who are here today, just weren’t around during the 1989 quake. They also see it as a low probability event. And they see earthquake insurance doubling their premiums. All those things are working together” to reduce insurance purchases, Grossi said.

Andy Doran is one of those Californians considering the cost of insurance coverage. He was a senior at Berkeley High School in 1989 when the quake hit. “I remember turning on the TV after riding it out in the doorway and finding static on all the channels except one,” he recalls. “‘The Cosby Show’ was somehow happily humming along so I knew everything would be all right.”

Now a scientist at Lawrence Berkeley National Laboratory, in the East Bay hills, Doran bought a house in Berkeley in 2011 (where the median home value today is over $1 million and up 13% in the past year) and is looking to add earthquake insurance, but premium payments in the realm of $4,000 a year and a $70,000 deductible are putting him off.

“The fact that it is a separate policy and so expensive with such a huge deductible, it’s difficult to impossible to accurately assess,” he said. “I’ve been convinced we should get it, but figuring out how to afford it is hard.”

Another ‘big one’ is inevitable

The reticence of California homeowners to buy earthquake insurance has many state and federal officials worried. The U.S. Geological Survey predicts that there is a 68% chance of a 7.0 magnitude earthquake in the Bay Area in the next 30 years, either along the San Andreas fault, which ruptured in 1989 and 1906, or the Hayward or Calaveras fault. The chance of a 6.7 magnitude quake over the next 30 years is now predicted at 99%, the USGS says.In Southern California, the site of the 1994 Northridge earthquake, the USGS sees an 82% change of a 7-magnitude temblor.

The 1906 San Francisco earthquake, which occurred 110 years ago on April 18, 1906, and was estimated at 7.8 magnitude, caused more than 3,000 deaths (700 from the quake and the rest from the resultant fire that swept through the city). Damages from the quake and fire were estimated at $400 million in 1906 dollars, or about $10.6 billion in 2015.

Most recently, the Aug. 24, 2014 quake in Napa, just north of the Bay Area, was a 6.0 magnitude quake, and caused more than $250 million in damage while killing one person and injuring more than 100.

“California is completely uninsured,” given the risk of a major quake along the faults, said David Schwartz, a geologist with the U.S. Geological Survey in Menlo Park, southeast of San Francisco. “I can’t tell you which (fault) will be the first to go, but we know that these faults have to move. You can run, but you can’t hide.”

Otto Greule Jr /Getty Images

Emergency workers prop up a collapsed building in the Marina district.

A 7.9 magnitude quake in the Bay Area could potentially cause as much as $200 billion in damage and $25 billion in insurance claims, and have a regional and national impact as bad as Hurricane Katrina’s aftermath, according to RMS.

The Hayward Fault runs under much of the East Bay and directly under the University of California at Berkeley’s Memorial Stadium (which was upgraded to be more earthquake resistant in 2012 at a cost of more than $300 million and has halves designed to move independently in a quake). Both RMS and the USGS predict that this fault is most likely to experience an earthquake of a 7.0 magnitude.

A quake of that magnitude could severely disrupt the Port of Oakland, the West Coast’s third-biggest port behind Seattle and Long Beach, Calif. Oakland handles more than $39 billion in containerized ship traffic, or 1,800 vessels a year.

“Our real concern is the Hayward Fault: It’s got the highest population density, and it’s heavily industrialized,” said Schwartz.

Indeed, the Bay Area has added 7.7 million new residents since 1989, and seen the value of its residential real estate go up 50%, to $1.2 trillion, in that time. “The good thing about a financial boom is it creates money to do seismic upgrades,” says Lewis Knight, regional director of planning and urban design with the architecture and design firm Gensler in San Francisco. “We’ve made so many advances in the 25 years since Loma Prieta.”

Knight noted that dozens of warehouses in the Bay Area—now home to tech companies and dot-coms—that were dangerous in 1989 have been rehabbed. “Any time you do 20% or more floor rehabilitation you must do a seismic upgrade per California code,” he said.

The CEA has also tried to convince Californians to buy more earthquake insurance.

CEA chief executive Glenn Pomeroy has implored residents to buy insurance and not to be put off by premium prices, which on average was $803 a year as of Dec. 31, 2014 and is as little as $100 a year in less vulnerable regions of California, like Sacramento or Fresno. (Of course, one reason earthquake insurance is inexpensive in those areas is that they’re far from active faults.)

“The insurance premiums aren’t the culprit,” he said in an interview. “There’s a mis-perception out there that insurance is based on market value and not the reconstruction cost. The problem is that the reconstruction costs keep going up,” he said. “Some people don’t like the high deductible, but if you’re uninsured for earthquake damage, you have a 100% deductible.”

Ibrahim Almufti, a structural engineer at Arup in San Francisco, says given the sizable deductibles for most insurance policies, either offered through the CEA or elsewhere, it makes better sense for homeowners in the most vulnerable areas to spend the money upgrading their home seismically.

CHRIS WILKINS/AFP/Getty Images

Search and rescue support workers embrace after rescuing a survivor at Oakland’s Cypress Freeway.

“My advice to my clients is not to buy earthquake insurance but invest it in your home yourself,” he said.

Hemant Shah, the founder of RMS, who was a student at Stanford University during the 1989 quake, disagrees, but he’s not surprised to hear the advice. “It’s a classic dilemma for homeowners,” he said. “The costs are here and now and the benefits are in the future.”

That’s just what Melissa Clyde Baylis, who lives in Pleasanton, just east of the Bay Area, is thinking.

A teenager living in Oakland at the time of the quake, she now lives in a home built in 1994, after both the Loma Prieta and Northridge quakes led to stronger building codes. As for earthquake insurance, she and other family members have opted to skip it entirely given the expense.

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